Urlman: How much Ford paid was just a function of where the stock was at the time of the deal--it has no significance for any "value" for Ballard stock, nor should it represent any floor for the stock, IMO.
There were two reasons why both Ford and Daimler bought stock in Ballard. The first has to do with the formation of the joint ventures, and the recognition by all concerned that if there were any profits in fuel cell cars, how they would be allocated would be a function of transfer prices: what does Ballard charge the engine joint venture for fuel cells, and what does the engine jv charge Daimler and Ford (and/or others) for engines made with those fuel cells.
Given that the car companies have an interest in keeping engine costs low, and given that the car companies have a bigger piece of the joint ventures than does Ballard, the temptation would be great for them to use their power to keep the engine price low and the fuel cell price extremely low, thus keeping all of the profit in their own pocket, and none in Ballard's.
They all recognized this incentive, so in order to create a counter incentive so Ballard has some chance of making money, both Ford and Daimler bought Ballard stock from the company at the market price, more or less, at the time they did their deals.
The other reason they bought stock in Ballard is because they know Ballard is going to fork over most of its cash over the next several years to pay for its share of the R&D. So this gave Ford and Daimler a way of turning what might be a R&D expense, which would hurt their income statements, into an asset (shares of Ballard), knowing that Ballard's losses won't hurt their own stock the way having lousy earnings due to heavy R&D would.
You are implying that Ford did some big analysis and thinks that Ballard is worth US$19 per share, and that it is somehow a bargain now as a result. It is obvious that nothing of the sort happened.
Why not go back to the Daimler deal, and use that price? If I am not mistaken, it was ostensibly US$35 pre-split, although only $25 of that was cash, with the rest the supposed value of contributed R&D (in other words, Daimler was able to take an expense off its income statement and call it an asset--shares of Ballard--instead. Great for executive bonuses when you can knock expenses down that way.) So US$25 in cash equals $8.33 after the split, so on the basis of what Daimler paid, the stock is more than twice true value, using your methodology. |
